An Interesting new “Auction” Site

BidRivals.com is an interesting new auction site, their business model is that you buy “bids” for $0.80 each. If you want to bid on an item it costs you $0.80, then if you win the auction you pay for it. Every bid increases the price by 2 cents. So if you see an auction with a current price of $2.00 that apparently means 100 bids have been placed – IE $80 have been spent.

Currently a Canon EOS 50D Digital SLR camera + a lens is on auction, it has a “buy it now” price of $2,499 (the same price that Harvey Norman advertises) and the bidding is at $163 and climbing – so the auction site has apparently made almost $6,500 in revenue and the product has not been sold yet! The auction also has no fixed end time, it seems that about 10 or 15 seconds are added to the clock every time someone bids, and the autobidder will kick in when 4 seconds remain. So there will probably be an autobid every 6-11 seconds – somewhere between 300 and 600 bids per hour at a cost of $0.80 each – every item that is running with autobids will generate something between $240 and $480 in revenue without being sold!

Now if you don’t win the auction (or give up trying to win) then you can buy it for the difference between the cost of your bids and the product price. In the case of the camera in question if you had made 500 bids (which would be quite easy with the autobid feature) then that would be $400 worth of bids, and given a choice between losing that $400 and using it as a down-payment on the regular retail price I think that most people would choose to buy the product. Of course if you buy it from Harvey Norman you save the delivery fee and probably get more options if you want to return it – I’ve never had to return something to Harvey Norman but I’m assuming that it would be a lot easier than returning an item to an online store!

I don’t consider this to be a real auction site. I believe that a real auction has genuine bids of a value that is determined by the bidder, the auctioneer (or auction software) may decline bids that are too low in value or which have too small an increment. Bidding in an auction generally costs the bidder nothing – the only exception I’ve personally seen is auctions which have a printed catalogue in which case you pay for the catelogue, a fixed fee which is small when compared to the auction prices. It seems to me that a significant portion of the revenue (possibly the majority of the revenue) of BidRivals is from the bidding fees, and the other significant portion of the revenue would be comprised of profits made from auction customers who opt to buy the item at it’s list price to avoid wasting the money that they have put in to bids. The actual prices of the items are small by comparison.

Note that I am not accusing BidRivals of doing anything illegal (such as running a gambling system), I am merely stating that I don’t believe that they offer a good deal for customers. While they aren’t strictly a gambling site, it seems that one could get lucky and make a single bid (costing $0.80) at the right time and get a $2,499 camera for $170 (or whatever it ends up selling for) while others may spend hundreds of dollars in bids and get nothing other than a potential down-payment on the full $2,499 price. That’s a lot more luck than I want in any of my purchases!

Steve: I guess that’s not surprising really. Such a profitable scam is sure to be repeated in many places.

Batosz: Good job by the Polish government!

Anon: They would use BidRivals, MadBid, or similar if they aren’t capable of doing the analysis I did and they want something cheap.

Really I’m not a fan of ebay either. The amount of effort you have to expend on bidding and assessing item quality often makes it financially a bad idea. I’m better off spending my time earning money than trying to get a good deal on ebay. When I buy at auction I prefer to buy from corporate auction sites, EG buying Dell and HP gear from auction sites where Dell and HP are the sellers. That removes a lot of the uncertainty from the transaction.

@etbe: I personally only use eBay for things I can’t buy new: vintage video games, old card games, and similar unavailable items. For those, eBay seems fairly good. You do need to consider quality, but you don’t necessarily need to bother with repeatedly bidding; I personally just bid the amount I feel willing to pay, and then either I win or I don’t.

I can see how it would be useful if you’re set on buying something specific and it’s being auctioned. If you don’t win, you’d spend just as much as you’d otherwise spend on it, but if you win, you save a whole bunch of money (especially if you bid wisely, instead of whenever someone else bid.)

Anon: Good point. Ebay is really good for that. I tend to mostly think about newish consumer electronics gear as that’s what I am most interested in buying, I should have considered the broader scope.

Kriti: Reasonable point, however I don’t think that Harvey Norman has the best prices on cameras in Australia, and for expensive items you can usually get a discount from the list price (I once got a $1,800 item knocked down to $1,400 just by asking once).

arekm: Thanks for that reference, when following the links from that I read about the “Bidding Fee Scheme” which exactly matches what I observed. But the Dollar Auction is a better example of the principle behind it.